Mortgage Rates Soar Ahead of Bank Decision

UK mortgage rates have surged to 5.14% ahead of Thursday's Bank of England policy meeting, affecting borrowers who put down just 5% deposits. This increase is significant, especially since the Bank's policy rate has remained at 3.75% since December.

The average fixed mortgage rates for two-year and five-year deals, as well as 95% loan-to-value mortgages, all rose to 5.14%, according to Rightmove's September 12 tracker. This is a notable increase from the previous week's averages of 4.97% and 4.98%. The higher rates are not limited to 95% loans; other loan-to-value brackets also saw increases.

Borrowers with larger deposits, however, can still secure lower rates. For instance, at 90% LTV, the average two-year fixed rate is now 4.92%, up from 4.85%. At 85% LTV, the two-year average increased by 12 basis points to 4.82%. These changes are reflected in the mortgage market's overall dynamics.

The Bank of England's upcoming decision will likely focus on guidance rather than a change in interest rates. Fixed mortgage prices tend to respond more directly to swap rates than to the current policy rate, allowing lenders to adjust their offers before the Monetary Policy Committee acts.